Baxter International Inc. has entered into a definitive agreement to acquire Gambro AB, a privately held dialysis product company based in Lund, Sweden, for total consideration of 26.5 billion SEK (approximately US$ 4.0 billion at current exchange rates).
Gambro is a global provider of dialysis products and technologies used in hemodialysis (HD) and continuous renal replacement therapy (CRRT), with annual sales of approximately $1.6 billion in 2011. Its portfolio in the traditional chronic care segment consists of HD devices including advanced monitors, dialyzers, bloodlines, cyclers and dialysis solutions. Its in-centre HD devices include the Artis system and the AK 96 system. In acute care, it has Prismaflex system used for the treatment of acute kidney injury.
The acquisition gives Baxter a comprehensive dialysis product portfolio, complements Baxter’s global home dialysis offerings, and positions the company to better meet the evolving needs of the large and growing dialysis market.
“Baxter has a legacy of innovation in dialysis, including the development of peritoneal dialysis for the treatment of end-stage kidney disease patients in the home. This acquisition further strengthens our global dialysis offerings by extending our portfolio in the hemodialysis segment,” said Robert L Parkinson, Jr., chairman and chief executive officer, Baxter.
“This transaction will provide attractive returns and enhance Baxter’s sales and earnings growth over the company’s current long-range financial plan,” he added.
“Both companies have a longstanding heritage in kidney care with innovative technologies and a dedication to saving, sustaining and improving the lives of patients worldwide,” said Guido Oelkers, president and chief executive officer, Gambro.
More than two million patients globally are on some form of dialysis, with dialysis treatment rates increasing more than five per cent annually in part due to the rising rates of diabetes and hypertension.
The transaction will provide a number of long-term growth opportunities for Baxter around the world. With a complementary dialysis product portfolio, Baxter can accelerate product sales in Europe, where Gambro has an extensive footprint. It can also expand its reach into regions of Latin America and Asia-Pacific, where Baxter has steadily grown its peritoneal dialysis (PD) business. In addition, Baxter will also build upon its pipeline of investigational home HD and automated PD systems by adding Gambro’s highly innovative and next-generation monitors, dialyzers, devices and dialysis solutions.
Excluding special items, the company expects this transaction to be dilutive to adjusted earnings per diluted share by $0.10 to $0.15 in 2013 and neutral to modestly accretive to adjusted earnings per diluted share in 2014. Excluding the impact of special items and estimated amortization of intangible assets, the company expects this transaction to be neutral to adjusted earnings per diluted share in 2013, and accretive in 2014 by $0.20 to $0.25 per diluted share. The company expects this transaction to be increasingly accretive to adjusted earnings per diluted share beyond 2014 and, in addition to an array of commercial synergies, projects opportunities for annual cost synergies totalling approximately $300 million by 2017. Baxter now expects over its five-year long-range financial plan to increase sales (excluding the impact of foreign currency) by seven to eight per cent and to grow adjusted earnings per diluted share in the eight to 10 per cent range, both on a compounded annual basis.
The transaction will be financed through a combination of cash generated from overseas operations and debt. Baxter expects to maintain its current dividend payout ratio of approximately 40 per cent. The closing of the transaction is subject to regulatory approvals and other customary closing conditions which is by first half of 2013.
J P Morgan acted as financial advisor and Kirkland & Ellis LLP acted as legal advisor to Baxter.